I Bonds Explained: Rates, Limits and How to Buy

I bonds are US Treasury savings bonds that pay a rate made of two parts: a fixed rate that lasts for the life of the bond and an inflation rate that resets every six months. As of 2026, I bonds issued from May 1 to October 31 earn 4.26%, you can buy up to $10,000 a year through TreasuryDirect, and your money is locked up for at least 12 months.

That makes I bonds a low-risk way to keep part of your savings in step with inflation, with real trade-offs in access and flexibility. This guide covers how the rate works, the limits, how to buy, taxes, and who they suit. It's education, not personal advice.

What are I bonds and how do they work?

An I bond is a loan to the US government that grows with inflation instead of paying a fixed coupon. You buy it electronically, it earns interest for up to 30 years, and you get your money plus interest when you cash it.

The key mechanics, according to TreasuryDirect:

• Interest compounds twice a year. Every six months, the interest earned is added to the bond's value, and the next six months of interest is calculated on that larger amount.
• Each bond's rate changes every six months from its issue date, not on a calendar date. A bond issued in March gets a new rate each September and March.
• The rate has a floor of zero. If prices fall so much that the formula would give a negative number, TreasuryDirect stops the composite rate at zero, so the bond's value doesn't go down.
• You don't get regular payments. Interest builds up inside the bond until you cash it.

I bonds are not "marketable" securities, so you can't sell them to another investor. You either keep them or cash them back to the Treasury. For how they compare with Treasury bills, notes, bonds and TIPS, see our guide to buying Treasury bonds, bills and notes. If you're still deciding where safe assets fit in your plan, our beginner's guide to investing walks through that first.

What is the current I bond rate?

For I bonds issued from May 1, 2026 to October 31, 2026, the composite rate is 4.26%. Treasury sets new rates every May 1 and November 1, so a bond bought from November 1, 2026 will start on whatever rate is announced then.

The composite rate is built from two numbers:

TreasuryDirect's formula is: fixed rate + (2 × semiannual inflation rate) + (fixed rate × semiannual inflation rate). With the current figures, 0.90% plus 3.34% plus a small cross term rounds to 4.26%.

The fixed rate matters most if you plan to hold for years. It's the part that stays with your bond after inflation cools. TreasuryDirect's history shows fixed rates have ranged from 0.00% in several periods to 3.60% in May 2000, so the 0.90% on current bonds sits in the middle of that range. Past rates don't tell you what future inflation adjustments will be.

How much can you buy in I bonds?

You can buy up to $10,000 in electronic I bonds per Social Security number in a calendar year. The minimum is $25, and above that you can buy any amount to the penny.

Some details to know:

• Paper I bonds are gone. TreasuryDirect says that as of January 1, 2025, you can no longer buy paper I bonds with your tax refund, and I bonds are now sold electronically only.
• Gifts have a waiting period. You must hold a gift bond in your account for at least five business days before you deliver it, and you need the recipient's Social Security number.
• College use has a catch. TreasuryDirect notes that if you want to use bonds tax-free for education, they must be in an adult's name, not the child's.

How do you buy I bonds?

You buy I bonds only through a TreasuryDirect account, not through a bank or brokerage. That's different from Treasury bills and notes, which brokers also sell.

To own a savings bond, TreasuryDirect requires a Social Security number and that you are a US citizen (living in the US or abroad), a US resident, or a civilian employee of the US government. The steps:

1. Open an individual account on TreasuryDirect.gov and link a US bank account.
2. Choose Series I savings bond in the purchase section.
3. Enter the amount, from $25 up to your remaining limit for the year.
4. Pick the purchase date, or set up a recurring purchase.
5. Keep your login details safe. The bond exists only in that account, so losing access means going through TreasuryDirect's recovery process.

If you're outside the US and don't meet those conditions, you can't buy I bonds. Other countries issue their own government and inflation-linked bonds; check your national debt office or tax authority for what's available where you live.

When can you cash I bonds, and what does it cost?

You can cash an I bond after you've owned it for 12 months. If you cash it before five years, you lose the last three months of interest. After five years there's no penalty, and the bond stops earning interest at 30 years.

Electronic bonds can be cashed in part, as long as you redeem at least $25 and leave at least $25 in the bond. The money goes to your linked bank account. The step-by-step process for electronic and old paper bonds is in our guide on how to cash in savings bonds.

Example (hypothetical): you put $5,000 in I bonds, the composite rate stayed at 4.26% the whole time, and you cash them after three years. The bond would be worth roughly $5,670, and losing three months of interest would cost you about $60. That's a modest penalty, but the bigger cost is the first year, when the money can't be touched at all.

How are I bonds taxed?

I bond interest is subject to federal income tax but not to state or local income tax. That state exemption can make I bonds more attractive in high-tax states.

You choose when to pay the federal tax:

• Defer it (most common). You report the interest when you cash the bond or when it reaches its 30-year final maturity, whichever comes first. TreasuryDirect puts the Form 1099-INT in your account in January after the year you cash.
• Report it every year. TreasuryDirect notes this can make sense for bonds in a child's name if the child is in a lower tax bracket now than later.

There's also an education exclusion. The IRS Education Savings Bond Program can make the interest tax-free if you use it for qualified higher education costs. The rules are strict: the owner must have been at least 24 when the bond was issued, income limits apply, and you claim it on Form 8815. Check IRS Publication 970 for the current income thresholds before counting on it. A 529 plan is the more common tool for college saving.

Are I bonds a good investment in 2026?

I bonds are a good fit for money you want to protect from inflation and won't need for at least a year, but they're not a growth investment. Over long periods, stocks have historically had higher growth potential, with much bigger swings along the way.

Here's how I bonds compare with other safe places for money, as of 2026:

I bonds tend to suit people who:

• Already have an emergency fund and want a safer home for medium-term savings.
• Live in a high-tax state and value the state tax exemption.
• Want an inflation hedge without watching market prices.

They tend not to suit people who might need the money within a year, who are investing for retirement decades away, or who need more than $10,000 a year in safe assets. For the bigger picture on inflation, our guide on how to invest during inflation puts I bonds next to stocks, TIPS and real assets.

Investing involves risk. Returns are not guaranteed, the I bond rate will change with inflation, and past rates don't predict future ones.

Next steps

• If you're eligible, open a TreasuryDirect account and decide how much of your safe savings you can lock up for at least a year.
• Check TreasuryDirect after November 1, 2026 for the new rate before you buy.
• See how I bonds fit next to index funds and retirement accounts in our guide to how to start investing.
• Want more income to save and invest? Explore our guide to making money online, keeping in mind that results depend on effort and time.